'Mobile phones are our history, not our future': Nokia on where next for hardware

Nokia's hardware chief reveals what to expect in health, virtual reality, and the Internet of Things
Written by Jo Best, Contributor

The Activité Steel is part of Withings' smartwatch range.

Image: Withings

With the ink barely dry on the contract to sell its handset business to Microsoft back in 2013, people started asking Nokia when it would get back into making phones again, and they've been asking ever since.

It looks like those people finally got their answer last month when news broke that Nokia branded smartphones, featurephones, and tablets would be seen on shelves once again.

However, the answer to the question 'is Nokia making phones again?' is an unequivocal no.

"We have absolutely no interest to go back into the mobile business. That's our history, not our future," Ramzi Haidamus, president of Nokia's Technologies unit, told ZDNet.

Instead, Nokia is licensing its name to a Finnish company called HMD, who will design, make, and sell Nokia-branded devices.

If you'd never heard of HMD before, you're not alone -- HMD only came into being when it signed the deal with Nokia. Made up of former Nokia execs with private equity backing, Nokia finally signed on the dotted line with HMD after being convinced that the company would "keep the brand pristine", according to Haidamus.

"The setup was the best setup so far, and we've examined something like around a dozen different approaches. People have been approaching us since the day we divested the business.... HMD was the one that presented us with the most attractive financial terms and, secondly, trust that the team that will be able to live up to the brand and the brand promise, and adherence to brand guidelines," he added.

Nokia won't be in any way involved in the company -- it won't be designing reference devices as it did for the N1 tablet that Foxconn made under the Nokia brand -- but that doesn't mean it's not aiming to be a force in hardware once again.

In April, Nokia announced its acquisition of French digital health company Withings for €170m. So why yes to health and no to smartphones?

"This is a vision that we've believed in and we've pursued, over the last two years. We've been developing [health] technology and solutions inside Nokia, experimenting both on the regulated and unregulated side of health, to see what we can bring to the market. As we developed some interesting technologies, it became clear that we were somewhat behind in the marketplace and we needed a partner that saw the world as we saw it. Acquiring Withings marked the start of the exciting new chapter in Nokia's history and makes Nokia a consumer brand once again," Haidamus said.

Depending on who you listen to, the digital health market is set to be worth between $61bn and $233bn by 2020, with devices for monitoring patients around $25bn. Withings already has a number of digital health products, including some rather pretty smartwatches, blood pressure and baby monitors, and some smart scales that track how fast blood travels through the aorta and uses the data as a measure of heart health.

Given the wealth of digital health companies out there and Nokia's large wallet -- it spent €15.6bn on acquiring Alcatel-Lucent the year before it bought Withings -- why did it decide to buy a relatively modest player in the health tech market?

"It's not so much about size," Haidamus said. "The more we looked at targets, the more we realised it was more about the right philosophy, the right approach to the product solutions, and the right DNA fit with Nokia."

According to Haidamus, the deal is "a reverse takeover" of Nokia's existing digital health business by Withings. "Withings' CEO Cédric Hutchings is "going to be integrating the Nokia teams within his teams and driving the bus without any ambiguity," he said. Nokia will be stepping in to help Withings expand its product range and refresh its current lines faster, however.

Despite Nokia's long heritage in hardware and its history robust-yet-eye-pleasing industrial design, Haidamus says Nokia is happy to let Withings plough ahead with its own look-and-feel.

"I believe in [Hutchings'] vision, the designs he's produced look exactly like the designs we would have produced, and so it's just a question of Cédric working closely with the Nokia team and integrating the Nokia teams into the right product line, the right SKUs... If you take a look at the Withings portfolio and put it next to our virtual reality camera, for example, you would think they were designed by the same company and the same designer."

The VR camera in question is OZO, a spherical camera that captures 3D film and video for use in virtual reality applications. Aimed at content producers like film studios, it's priced at $60,000 and will be used to make extra content for Disney films.

While OZO is the only Nokia product in the digital media space to date, the company is already planning "much more featureful technology products in the camera space at a lower cost" and new software playback offerings, Haidamus said.

Products aren't the only priority for Nokia in VR -- the company wants to go out and make new friends too.

"In the digital media space, clearly with VR this is a market that has to take its course, no one company can accelerate it. We need to partner with Faacebook, we need to partner with Google, Samsung, with anyone that is willing to partner to accelerate the market... As a market has to take its course, that will take longer, but we'll be here for the long term," Haidamus said.

After the sale of its HERE maps unit last year, Nokia has two main business units: networking and hardware. The importance of both to the future of the company can't be overstated, but does that mean that we'll be seeing more acquisition of more companies to enable expansion into new areas?

Haidamus maintains not. "I think the digital health space and the high-growth virtual reality space will keep us busy for quite some time. I do not foresee us branching out into a third area." That's not to say Nokia won't make opportunistic buys if something interesting comes up, but there are no plans for 'string a pearls' buys as a vehicle for growing the business.

Diversification, however, is on the cards, but Nokia is hoping it will come from its existing hardware businesses, particularly by giving it an entrée into the Internet of Things.

"The definition of digital health is more about wellness and monitoring of where you live and where you work. That diversification sits within the digital health," Haidamus says.

In the case of Withings, lots of its hardware not only monitors an individual's biomarkers but also other elements of their environment -- the air quality or sound levels, for example.

The IoT space is "huge and growing, and frankly, IoT is a very generic term. It's like someone saying 'digital' in the 1980s or 'plastic' in the 1960s. Our history is connectivity... connected products, no matter how small or how large, having them work together and using the insights and data from multiple products that are monitoring your health and your surroundings, with a strong analytic background and strong ability to abstract all that data to give consumers insights, as well as potentially businesses such as insurance companies or doctors or hospitals, that's the true definition of IoT," Haidamus says.

So, not only will expanding into hardware and IoT make Nokia a consumer brand again, it could also give it a boost in the enterprise segment by bringing it more into contact with assorted health providers and related companies.

However, its existing IoT portfolio is mainly aimed at telcos and other comms providers who want to optimise their networks for IoT traffic, though the IoT Community project it's involved with has a more broad base, hoping to get businesses from various sectors sharing ideas on new business models and prototypes for the Internet of Things. It's one area where Nokia is seeking to grow. The company has just unveiled a IoT platform called Impact.

IoT is "the sum of the many giving you the insight that no one product would have been able to give you," Haidamus says. "We do have that ability today, we have our connectivity team, our engineers... we have our sister companies in the network side that have strong apps, analytic businesses and infrastructure businesses where we can leverage this to extend further."

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